In fact, last week, the company raised its metal prices by Rs 2,500 per tonne to Rs 73,000 per tonne. A partial closure at Nalco's smelter also augurs well for Hindalco.

The performance has also been encouraging. In the second half (September 1997-March 1998), the company has managed to post sales of Rs 775 crore, up 11 per cent over the first half's (April-September 1997) figure of Rs 698 crore. Operating-profit margins in the second half of 1997-98 stood at 42.37 per cent, compared with 39.71 per cent in the first half.

During 1997-98, while net sales grew by 27.33 per cent in value terms, the raw-material cost was up by 16.84 per cent. During the year, manufacturing expensesrose by 22.65 per cent and selling and administrative expenses increased by 17.32 per cent. This shows that while realisations have improved, the company has managed to control it costs.

The realisations per tonne for aluminium ingots, rolled products, extruded products and commercial/alloy rods have increased by 11.2 per cent, 3 per cent, 1 per cent and 4.85 per cent respectively. This was quite impressive if one were to consider the depressed international aluminium prices, especially in the second half. As a result, margins at the operational level were up.

For the first quarter of 1998-99, except for the past three weeks, the international aluminium prices have remained depressed. For Hindalco, however, the depreciation of the rupee and the budget, where 4 per cent duty was imposed on imports, have provided a sufficient cushion. The recent partial closure of Nalco's smelter has also made things comfortable for Hindalco.

As such, a bearish trend on the counter came as a surprise. While an overallbearish trend in the stock market could partly be responsible for this, the perception that the international aluminium prices are unlikely to hold these levels also had its impact.

But more than these factors, the Aditya Aluminium project seems to be playing a major role for the market. Although Hindalco's debt-equity ratio is quite comfortable, if implemented, this project would require huge funds, which would put pressure on the company's cash flow. A final decision for the proposed project will follow completion of the study, which is scheduled for the second quarter of 1998-99. Unless the position on this project becomes clear, the stock will get less weightage than it should have got in the normal circumstances.

Mico: MICO's second-quarter (April 1998-June 1998) results are not impressive. While sales fell by 7.26 per cent to Rs 318.77 crore, net profit was down by 60 per cent to Rs 2.38 crore. But if one were to compare these figures with the first quarter's (January 1998-March 1998), theperformance is satisfactory, if not impressive.

Perhaps, the results indicate that the automobile sector--the main customer for Mico--seems to be making an attempt to turnaround. Compared with Rs 286.57 crore in the first quarter, sales stood at Rs 318.77 crore in the second, representing a growth of 11.23 per cent. More importantly, the company has more or less managed to maintain its operating profit. The operating profit has fallen marginally from 11.71 per cent in the first quarter to 11.65 per cent in the second. However, if one compares the net-profit figure, there has been a sharp decline from Rs 4.77 crore in the first quarter to Rs 2.38 crore in the second. This is mainly on account of lower other income and higher tax.

Since sales at Mico are generally higher in the second half, and signs of a revival in the automobile sector are expected, the performance in the next two quarters are expected to be comparatively better. As for the stock market, anticipation of an improved performance would besufficient to attract buyers at lower levels. When the Sensex lost 86 points on Monday, Mico's stock gained by Rs 77 to Rs 3,687.